AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (12) TMI 283
X X X X Extracts X X X X
X X X X Extracts X X X X
....der is common in both the appeals, therefore, we are also dealing with both the appeals by this common order. 2. The dispute involved herein is about the admissibility of cenvat credit of service tax paid by the appellant on deposit insurance premium to 'Deposit Insurance and Credit Guarantee Corporation' (hereinafter referred to as "DICGC")? 3. The Appellant is a Co-operative Bank and is engaged in providing 'banking and financial services' and according to the department, they have wrongly availed cenvat credit in respect of service tax paid on deposit insurance service provided by 'Deposit Insurance and Credit Guarantee Corporation' which does not qualify as 'input service' as defined under Rule 2(l) of Cenvat Credit Rules, 2004. Accordingly, two show cause notices dated 28.12.2015 (for the period May,2014 to June,2015) and dated 06.09.2016 [for the period 2015-16] respectively were issued to the appellant demanding inadmissible cenvat credit availed by the appellant alongwith appropriate rate of interest and penalty which got confirmed by the Adjudicating Authority by two separate Orders-in-Original. On appeals filed by the appellant, Ld. Commissioner (Appeals) vide common im....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rim Order of the Larger Bench and it will not be out of place to reproduce the relevant paragraphs/findings of the said Interim Order, which are as under:- "4. The issue that has been referred to this Larger Bench is whether the appellant can avail credit of this service tax paid by the appellant for the service provided to the appellant by the Deposit Insurance Corporation. 5. This issue was examined at length by a Larger Bench of the Tribunal in South Indian Bank vs. Commissioner of Customs, C.Ex.& ST., Calicut- 2020 (41) GSTL 609 (Tri.-LB) and after a consideration of the provisions of the Finance Act, the CENVAT Rules, the Deposit Insurance Act and the Regulations it was held: "50. It cannot, therefore, be doubted that the insurance service received by the banks from the Deposit Insurance Corporation is not only mandatory but is also commercially expedient. In fact, without this service the banks may not be able to function at all. 51. Premium is paid by the banks to the Deposit Insurance Corporation for providing the insurance service for which the banks pay service tax. It is this service tax paid by the banks on the insurance service received by the banks from the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....luded in the returns filed by the banks with the Deposit Insurance Corporation for calculating the premium payable. The banks cannot avail credit of service tax on any amount of interest earned on extending of deposits. It is, therefore, not possible to accept the contention of the Department that "accepting" of deposits is covered under section 66D(n) of the Finance Act. ****** 56. It has also been submitted by learned Counsel appearing for the banks that even if it is assumed that some part of the deposit is not used for providing "output service", then too the banks are still entitled for the credit availed on the insurance service provided by the Deposit Insurance Corporation as the banks have reversed 50% of the total CENVAT credit taken in terms of rule 6(3B) of the 2004 Rules.**** This sub-rule (3B) has, therefore, been introduced with a view to disallow the credit of input and input services attributable to interest/investment income earned by banking companies. Having regard to the fact that it is difficult to ascertain the actual amount of input and input services used in earning interest income, sub- rule (3B) provides for reversal of 50% of input and input service....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dit can be availed. ****** 60. It needs to be noted that the aforesaid decision of the Karnataka High Court in PNB Metlife India has been accepted by the Central Board of Excise and Customs in the Circular dated 16 February, 2018. The relevant paragraphs 8 and 8.1 are reproduced below: "8. Decision of the Hon'ble High Court of Karnataka at Bangalore dated 09.04.2015 in the case of M/s.PNB Metlife India Insurance Company Ltd .Bangalore [2015 (39) STR 561 (Kar.)] 8.1. Department has accepted the aforementioned order of the Hon'ble High Court of Karnataka. The issue examined in the order was, whether Reinsurance is an input service which is used for providing output service, namely, insurance and whether CENVAT Credit take non re-insurance service is admissible. Hon'ble High Court held that re-insurance is a statutory obligation and the same is co-terminus with the insurance policy. Issuance of insurance policy by insurer, and then taking of reinsurance by it, is a continuous process. Re- insurance is, therefore, an input service." 61. In the present appeals also, in order to render any output service under the category of "banking and other financial services", it is n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....served that the Revenue was also not able to urge any contention to substantiate why the decision of the Kerala High Court in accepting the decision of the Larger Bench of the Tribunal should not be accepted. 14. The Bombay High Court in Principal Commissioner of CGST and Central Excise, Mumbai East vs. ICICI Bank Ltd.;2023 (79) G.S.T.L.387 (Bom.), Bank of Maharashtra vs. Commissioner of CGST & C. Ex., Pune-II;2020 (42) G.S.T.L.491 (Bom.) and ICICI Bank Limited vs. Commissioner, GST & CX., Bhiwandi; Central Excise Appeal No.183 of 2019 decided on 26.11.2020, while examining the same issue as to whether banks can avail CENVAT credit of the insurance services provided by the Deposit Insurance Corporation to the banks, set aside the order passed by the department and remanded the matter to the Tribunal for a fresh consideration and passing of an order in conformity with the order of the Larger Bench in South Indian Bank." 10. Following the decision of the Larger Bench of the Tribunal in South Indian Bank (supra), Division Bench of the Tribunal therein vide Final Order No.20691-20708/2020 dated 20.03.2020 allowed the appeal of South Indian Bank. The said order of the Tribunal was ....